China and the World of Business • China Business and the World

Lots of big music industry folks down at Music Matters in Hong Kong last week. For those of you not familiar with the confab, it is basically an opportunity for everyone who touches the music business to sit down and talk about the business in Asia.

The attendees included EMI, Mercury Records, Sony BMG, Universal Music, and Warner Music Group, along with a host of other companies in different parts of the industry.

It’s Like a Royal Navy Symposium, circa 1740

Naturally, at the top of everyone’s agenda was piracy, and that got a lot of play. Reading the coverage each music executive sounded like a cross between Babbit and Marvin the Paranoid Android, spinning tales of woe about how they are all getting ripped off by those bad kids ripping their pirated CDs.

Research house Synovate contributed their little bit to the gloom, with survey results from around the region suggesting that one out of five of Asia’s young urban consumers purchased a bootleg CD in the last month, and one in four downloaded an illegal song from the Internet. Synovate’s stuff is interesting, but all it offered was a snapshot rather than some inkling of how some of those numbers might be evolving.

The downer of the session likely came from industry group IFPI, who estimate that piracy costs the music business $400 million annually around the region.

Now, that’s not good, certainly, and we here in the Hutong are scrupulous – nay, anal – about legitimate content. But with clients and family in what has become affectionately known as “the Biz,” I’ll grant we are no test case.

Nonetheless, there is a sunny side to the music business in Asia, and the folks at the record labels appear to have a lot more to be happy about than the movie, television, and shrinkwrapped-software crowds.

The Music Industry Eats Its Wheaties in Asia

Brian Bremmer at BusinessWeek did a nice write-up on the program (“Asia’s digital Music Free-for-All“,) and he points to the PriceWaterhouse Coopers study that estimates Asia’s digital music industry at over $4.2 billion. In other words, if you believe the stats, digital music sales alone, not counting sales of CDs or cassettes, is four times LARGER than the total estimated piracy losses in the region. Think the MPA would kill for those kinds of stats? You bet. And the digital music industry is supposed to rise to over $9.35 billion in Asia.

(Okay, so can we fess up to the idea that digital media is not such a terrible thing after all? That while it eases piracy and cuts down on album sales because people are just buying the tracks they want, that it really is a significant market?)

And you need to look at what is driving the market: mobile phones. PWC says that 85% of that $4.2 billion were songs downloaded directly to music-enabled mobile phones. Half of the people MTV surveyed in Asia said they would listen to music more if they had a mobile music device like a music-enabled handset.

The Future of Music is Mobile

You look at all of these numbers, and you are led to a couple of inescapable conclusions:

1. Piracy sucks and still exists in Asia. (It still exists in America, for that matter, but we digress)

2. The future of music in Asia is mobile, and it’s a robust business already with huge growth prospects. Any artist, label, distributor, or retailer not doing everything they can to make legitimate music more accessible to Asia’s one billion (and growing) mobile device owners is both ignoring their future and giving the business away to pirates.

The challenge is for the industry to work together to make listening to music an increasingly fast, easy, and delightful experience. The model is there and its working. Now the challenge is to broaden the appeal.

It’s absolutely stunning Apple didn’t own this event. My friends at Apple need to get their collective act together. The music lovers in this region are shopping at other vendors and building that habit. Don’t wait for long, guys. The market sure won’t.